Long
Allegiant Travel Co (ALGT)
Monday, December 9, 2013
Company Symbol Industry Rating YTD % Gain
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Allegiant Travel Co - Last 30 Days
Allegiant Travel Co - Last 3 Months
Allegiant Travel Co - Last 6 Months
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The Trade:
Airlines stocks finally stumbled a bit in the first week of December, marking the first time since August that the sub-industry has seen even a modest pull-back. Buying the dips of what's working is a great way to enter trades, but the problem here is that a) The Airlines sub-industry is tiny and B) this "dip" may not be enough to hop on board high-fliers (pun intended!) like Southwest (LUV), Delta (DAL), or Alaska Air (ALK). However, scanning through the constituents, there is a great opportunity to enter into one of the smaller cap Airlines, Allegiant Travel Co (ALGT) for a nice swing-trade.
ALGT has been trending steadily higher since October of 2012, and it took until the summer of 2012 for the stock to consolidate in a significant fashion. ALGT found its base just below $95 through the month of August, before resuming its run higher into the end of the year. Recently, ALGT hit highs of $114.70 on November 29th before pulling back along with the other Airlines stocks. Currently, ALGT has based rather quickly and looks poised for a turnaround in the short-term.
The stock has excellent support in the $105-$108 area, which it spent the latter half of October and most of November establishing. ALGT's recent base is at the upper-end of this support, which seems to be holding just fine over the past few sessions. ALGT is also operating comfortably above its 50-day moving average, which is a bullish sign.
Since the end of its summer consolidation, ALGT has been making higher highs and higher lows while establishing solid support levels. This is clearly visible in its up-trending channel (see chart below). There is immediate upside to $114.70, which is +6.95% higher from current prices. A stop at a break of the support range ($104) makes the downside risk -3.02%, which makes the reward to risk ratio of this trade greater than 2 to 1.
The recent pullback in Airlines creates a rare opportunity to get some long exposure to one of the top-performing sub-industries of 2013. ALGT has a strong technical set-up and features a compelling trade set-up that other Airlines stocks don't offer.
Entery Method:
Buy at the current price (~$107.35).
Exit Method:
Sell at a close below $104.00 (Breakdown) / An intraday price of $114.70 or above (Profit-Taking)
Company Profile:
Allegiant Travel Company is a leisure travel company focused on providing travel services and products to residents of small, underserved cities in the United States. The Company operates a passenger airline marketed primarily to leisure travelers in small cities, allowing it to sell air transportation both on a stand-alone basis and bundled with the sale of air-related and third party services and products. In addition, it provides air transportation under fixed fee flying arrangements. The Company provides scheduled air transportation on limited frequency nonstop flights between small city markets and leisure destinations. As of February 1, 2013, its operating fleet consisted of 58 MD-80 aircraft and six Boeing 757-200 aircraft providing service on 191 routes to 85 cities including 13 leisure destinations and 72 small cities and including cities served seasonally. In January 2012, the Company took ownership of two MD-80 aircraft.
Stock Rating:
The Stock Rating indicates the combined score of our proprietary Earning Strength and Company Performance models. The rating scale is 0 - 10 with 10 being the highest.
Disclosure:
At the time of publication the editor and affiliated companies own the following positions:
None
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